Correlation Between NMI Holdings and Zimmer Biomet

Can any of the company-specific risk be diversified away by investing in both NMI Holdings and Zimmer Biomet at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NMI Holdings and Zimmer Biomet into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NMI Holdings and Zimmer Biomet Holdings, you can compare the effects of market volatilities on NMI Holdings and Zimmer Biomet and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NMI Holdings with a short position of Zimmer Biomet. Check out your portfolio center. Please also check ongoing floating volatility patterns of NMI Holdings and Zimmer Biomet.

Diversification Opportunities for NMI Holdings and Zimmer Biomet

-0.18

Correlation Coefficient

NMI Holdings  Zimmer Biomet

Good diversification

The 3 months correlation between NMI and Zimmer is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding NMI Holdings and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings and NMI Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NMI Holdings are associated (or correlated) with Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of NMI Holdings i.e., NMI Holdings and Zimmer Biomet go up and down completely randomly.

Pair Corralation between NMI Holdings and Zimmer Biomet

Assuming the 90 days horizon NMI Holdings is expected to under-perform the Zimmer Biomet. In addition to that, NMI Holdings is 1.3 times more volatile than Zimmer Biomet Holdings. It trades about -0.04 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about 0.09 per unit of volatility. If you would invest  9,474  in Zimmer Biomet Holdings on October 6, 2024 and sell it today you would earn a total of  661.00  from holding Zimmer Biomet Holdings or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

NMI Holdings  vs.  Zimmer Biomet Holdings

NMI Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NMI Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NMI Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with NMI Holdings and Zimmer Biomet

The main advantage of trading using opposite NMI Holdings and Zimmer Biomet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NMI Holdings position performs unexpectedly, Zimmer Biomet can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Zimmer Biomet will offset losses from the drop in Zimmer Biomet's long position.

The idea behind NMI Holdings and Zimmer Biomet Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.